Chemed Reports First-Quarter 2012 Results

Chemed operates in the residential and commercial plumbing and drain cleaning industry under the brand name Roto-Rooter. Roto-Rooter provides plumbing and drain service through company-owned branches, independent contractors and franchisees in the United States and Canada. Roto-Rooter also has licensed master franchisees in Indonesia, Singapore, Japan, and the Philippines.

This press release contains information about Chemed’s EBITDA, Adjusted EBITDA and Adjusted Diluted EPS, which are not measures derived in accordance with GAAP and which exclude components that are important to understanding Chemed’s financial performance. In reporting its operating results, Chemed provides EBITDA, Adjusted EBITDA and Adjusted Diluted EPS measures to help investors and others evaluate the Company’s operating results, compare its operating performance with that of similar companies that have different capital structures and evaluate its ability to meet its future debt service, capital expenditures and working capital requirements. Chemed’s management similarly uses EBITDA, Adjusted EBITDA and Adjusted Diluted EPS to assist it in evaluating the performance of the Company across fiscal periods and in assessing how its performance compares to its peer companies. These measures also help Chemed’s management to estimate the resources required to meet Chemed’s future financial obligations and expenditures. Chemed’s EBITDA, Adjusted EBITDA and Adjusted Diluted EPS should not be considered in isolation or as a substitute for comparable measures calculated and presented in accordance with GAAP. We calculated Adjusted EBITDA Margin by dividing Adjusted EBITDA by service revenue and sales. A reconciliation of Chemed’s net income to its EBITDA, Adjusted EBITDA and Adjusted Diluted EPS is presented in the tables following the text of this press release.

Forward-Looking Statements

Certain statements contained in this press release and the accompanying tables are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "hope," "anticipate," "plan" and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Chemed does not undertake and specifically disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These statements are based on current expectations and assumptions and involve various risks and uncertainties, which could cause Chemed's actual results to differ from those expressed in such forward-looking statements. These risks and uncertainties arise from, among other things, possible changes in regulations governing the hospice care or plumbing and drain cleaning industries; periodic changes in reimbursement levels and procedures under Medicare and Medicaid programs; difficulties predicting patient length of stay and estimating potential Medicare reimbursement obligations; challenges inherent in Chemed's growth strategy; the current shortage of qualified nurses, other healthcare professionals and licensed plumbing and drain cleaning technicians; Chemed’s dependence on patient referral sources; and other factors detailed under the caption "Description of Business by Segment" or "Risk Factors" in Chemed’s most recent report on form 10-Q or 10-K and its other filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on such forward-looking statements and there are no assurances that the matters contained in such statements will be achieved.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)(unaudited)
			Three Months Ended March 31,
			2012				2011
Service revenues and sales			$	352,943			$	330,918
Cost of services provided and goods sold				257,445				237,458
Selling, general and administrative expenses (aa)				53,167				55,654
Depreciation				6,241				6,288
Amortization				1,113				970
	Total costs and expenses			317,966				300,370
	Income from operations			34,977				30,548
Interest expense				(3,617	)			(3,244	)
Other income/(expense)--net (bb)				2,095				2,102
	Income before income taxes			33,455				29,406
Income taxes				(13,010	)			(11,305	)
Net income			$	20,445			$	18,101
Earnings Per Share
	Net income		$	1.08			$	0.86
	Average number of shares outstanding			18,958				21,055
Diluted Earnings Per Share
	Net income		$	1.06			$	0.84
	Average number of shares outstanding			19,353				21,568
(aa)	Selling, general and administrative ("SG&A") expenses comprise (in thousands):
			Three Months Ended March 31,
			2012				2011
	SG&A expenses before long-term incentive compensation and the impact of market value gains of deferred compensation plans		$	51,034			$	50,578
	Market value gains on assets held in deferred compensation trusts			2,133				2,064
	Long-term incentive compensation			-				3,012
	Total SG&A expenses		$	53,167			$	55,654
(bb)	Other income/(expense)--net comprises (in thousands):
			Three Months Ended March 31,
			2012				2011
	Market value gains on assets held in deferred compensation trusts		$	2,133			$	2,064
	Loss on disposal of property and equipment			(81	)			(21	)
	Interest income			51				61
	Other			(8	)			(2	)
	Total other income/(expense)--net		$	2,095			$	2,102

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)(unaudited)
			March 31,
			2012						2011
Assets
Current assets
Cash and cash equivalents			$	34,214					$	59,745
Accounts receivable less allowances				110,656						92,912
Inventories				8,468						7,967
Current deferred income taxes				13,725						13,352
Prepaid income taxes				637						-
Prepaid expenses				9,576						9,538
Total current assets				177,276						183,514
Investments of deferred compensation plans held in trust				35,055						31,897
Properties and equipment, at cost less accumulated depreciation				88,579						79,146
Identifiable intangible assets less accumulated amortization				57,941						57,579
Goodwill				461,064						458,434
Other assets				11,568						12,158
Total Assets			$	831,483					$	822,728
Liabilities
Current liabilities
Accounts payable			$	52,999					$	38,249
Income taxes				13,334						8,250
Accrued insurance				37,305						35,511
Accrued compensation				35,834						39,469
Other current liabilities				15,724						14,457
Total current liabilities				155,196						135,936
Deferred income taxes				27,256						24,164
Long-term debt				168,759						161,054
Deferred compensation liabilities				34,186						31,437
Other liabilities				11,629						6,267
Total Liabilities				397,026						358,858
Stockholders' Equity
Capital stock				31,063						30,709
Paid-in capital				404,546						379,167
Retained earnings				564,130						488,439
Treasury stock, at cost				(567,279	)					(436,427	)
Deferred compensation payable in Company stock				1,997						1,982
Total Stockholders' Equity				434,457						463,870
Total Liabilities and Stockholders' Equity			$	831,483					$	822,728

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)(unaudited)
						Three Months Ended
						March 31,
						2012				2011
Cash Flows from Operating Activities
Net income						$	20,445			$	18,101
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization							7,354				7,258
Provision for deferred income taxes							(3,397	)			814
Provision for uncollectible accounts receivable							2,245				2,111
Amortization of discount on convertible notes							1,975				1,846
Stock option expense							1,938				1,933
Noncash long-term incentive compensation							-				2,595
Changes in operating assets and liabilities, excluding amounts acquired in business combinations:
Decrease/(increase) in accounts receivable							(34,949	)			17,923
Decrease/(increase) in inventories							200				(239	)
Decrease in prepaid expenses							1,833				747
Decrease in accounts payable and other current liabilities							(3,894	)			(12,137	)
Increase in income taxes							15,532				9,739
Increase in other assets							(3,654	)			(3,667	)
Increase in other liabilities							5,241				3,227
Excess tax benefit on share-based compensation							(797	)			(1,895	)
Other sources							309				185
Net cash provided by operating activities							10,381				48,541
Cash Flows from Investing Activities
Capital expenditures							(12,018	)			(6,173	)
Business combinations							(415	)			-
Other sources/(uses)							311				(109	)
Net cash used by investing activities							(12,122	)			(6,282	)
Cash Flows from Financing Activities
Dividends paid							(3,072	)			(2,977	)
Purchases of treasury stock							(1,431	)			(24,260	)
Proceeds from issuance of capital stock							1,042				3,647
Excess tax benefit on share-based compensation							797				1,895
Increase/(decrease) in cash overdrafts payable							226				(8,310	)
Debt issuance costs							-				(2,708	)
Other sources							312				282
Net cash used by financing activities							(2,126	)			(32,431	)
Increase/(Decrease) in Cash and Cash Equivalents							(3,867	)			9,828
Cash and cash equivalents at beginning of year							38,081				49,917
Cash and cash equivalents at end of period						$	34,214			$	59,745

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(in thousands)(unaudited)
																			Chemed
							VITAS				Roto-Rooter				Corporate				Consolidated
2012
Service revenues and sales							$	260,847			$	92,096			$	-			$	352,943
Cost of services provided and goods sold								205,620				51,825				-				257,445
Selling, general and administrative expenses (a)								19,748				26,153				7,266				53,167
Depreciation								4,025				2,085				131				6,241
Amortization								490				154				469				1,113
	Total costs and expenses							229,883				80,217				7,866				317,966
	Income/(loss) from operations							30,964				11,879				(7,866	)			34,977
Interest expense (a)								(62	)			(108	)			(3,447	)			(3,617	)
Intercompany interest income/(expense)								755				395				(1,150	)			-
Other income/(expense)—net								(31	)			(20	)			2,146				2,095
	Income/(loss) before income taxes							31,626				12,146				(10,317	)			33,455
Income taxes (a)								(11,999	)			(4,650	)			3,639				(13,010	)
	Net income/(loss)						$	19,627			$	7,496			$	(6,678	)		$	20,445
2011
Service revenues and sales							$	235,673			$	95,245			$	-			$	330,918
Cost of services provided and goods sold								184,300				53,158				-				237,458
Selling, general and administrative expenses (b)								18,711				26,740				10,203				55,654
Depreciation								4,167				1,984				137				6,288
Amortization								483				132				355				970
	Total costs and expenses							207,661				82,014				10,695				300,370
	Income/(loss) from operations							28,012				13,231				(10,695	)			30,548
Interest expense (b)								(48	)			(64	)			(3,132	)			(3,244	)
Intercompany interest income/(expense)								1,213				639				(1,852	)			-
Other income/(expense)-net								30				(9	)			2,081				2,102
	Income/(loss) before income taxes							29,207				13,797				(13,598	)			29,406
Income taxes (b)								(11,082	)			(5,286	)			5,063				(11,305	)
	Net income/(loss)						$	18,125			$	8,511			$	(8,535	)		$	18,101

The "Footnotes to Financial Statements" are integral parts of this financial information.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATING SUMMARY OF EBITDA
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(in thousands)(unaudited)
																		Chemed
						VITAS				Roto-Rooter				Corporate				Consolidated
2012
Net income/(loss)						$	19,627			$	7,496			$	(6,678	)		$	20,445
Add/(deduct):
	Interest expense						62				108				3,447				3,617
	Income taxes						11,999				4,650				(3,639	)			13,010
	Depreciation						4,025				2,085				131				6,241
	Amortization						490				154				469				1,113
	EBITDA						36,203				14,493				(6,270	)			44,426
Add/(deduct):
	Legal expenses of OIG investigation						71				-				-				71
	Acquisition expenses						-				15				-				15
	Expenses of class action litigation						-				647				-				647
	Stock option expense						-				-				1,938				1,938
	Advertising cost adjustment (c)						-				(706	)			-				(706	)
	Interest income						(30	)			(8	)			(13	)			(51	)
	Intercompany interest income/(expense)						(755	)			(395	)			1,150				-
	Adjusted EBITDA					$	35,489			$	14,046			$	(3,195	)		$	46,340
2011
Net income/(loss)						$	18,125			$	8,511			$	(8,535	)		$	18,101
Add/(deduct):
	Interest expense						48				64				3,132				3,244
	Income taxes						11,082				5,286				(5,063	)			11,305
	Depreciation						4,167				1,984				137				6,288
	Amortization						483				132				355				970
	EBITDA						33,905				15,977				(9,974	)			39,908
Add/(deduct):
	Legal expenses of OIG investigation						511				-				-				511
	Acquisition expenses						64				6				-				70
	Expenses of class action litigation						-				495				-				495
	Long-term incentive compensation						-				-				3,012				3,012
	Stock option expense						-				-				1,933				1,933
	Advertising cost adjustment (c)						-				(250	)			-				(250	)
	Interest income						(37	)			(7	)			(17	)			(61	)
	Intercompany interest income/(expense)						(1,213	)			(639	)			1,852				-
	Adjusted EBITDA					$	33,230			$	15,582			$	(3,194	)		$	45,618

The "Footnotes to Financial Statements" are integral parts of this financial information.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
RECONCILIATION OF ADJUSTED NET INCOME
(in thousands, except per share data)(unaudited)
								Three Months Ended March 31,
								2012			2011
Net income as reported								$	20,445		$	18,101
Add/(deduct):
		After-tax additional interest expense resulting from the change in accounting for the conversion feature of the convertible notes							1,225			1,132
		After-tax stock option expense							1,224			1,223
		After-tax cost of expenses of class action litigation							393			301
		After-tax cost of legal expenses of OIG investigation							44			317
		After-tax cost of acquisition expenses							9			44
		After-tax cost of long-term incentive compensation							-			1,880
Adjusted net income								$	23,340		$	22,998
Earnings Per Share As Reported
		Net income						$	1.08		$	0.86
		Average number of shares outstanding							18,958			21,055
Diluted Earnings Per Share As Reported
		Net income						$	1.06		$	0.84
		Average number of shares outstanding							19,353			21,568
Adjusted Earnings Per Share
		Net income						$	1.23		$	1.09
		Average number of shares outstanding							18,958			21,055
Adjusted Diluted Earnings Per Share
		Net income						$	1.21		$	1.07
		Average number of shares outstanding							19,353			21,568

The "Footnotes to Financial Statements" are integral parts of this financial information.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
OPERATING STATISTICS FOR VITAS SEGMENT
(unaudited)
								Three Months Ended March 31,
	OPERATING STATISTICS							2012					2011
		Net revenue ($000) (d)
			Homecare					$	186,597				$	168,652
			Inpatient						29,152					27,386
			Continuous care						42,521					38,625
				Total before Medicare cap allowance				$	258,270				$	234,663
			Medicare cap allowance						2,577					1,010
				Total				$	260,847				$	235,673
		Net revenue as a percent of total before Medicare cap allowance
			Homecare						72.2		%			71.8		%
			Inpatient						11.3					11.7
			Continuous care						16.5					16.5
				Total before Medicare cap allowance					100.0					100.0
			Medicare cap allowance						1.0					0.4
				Total					101.0		%			100.4		%
		Average daily census ("ADC") (days)
			Homecare						9,613					8,833
			Nursing home						2,986					3,033
				Routine homecare					12,599					11,866
			Inpatient						472					450
			Continuous care						632					603
				Total					13,703					12,919
		Total Admissions							16,322					15,798
		Total Discharges							16,196					15,552
		Average length of stay (days)							82.4					78.9
		Median length of stay (days)							14.0					13.0
		ADC by major diagnosis
			Neurological						34.2		%			34.0		%
			Cancer						17.9					17.9
			Cardio						11.6					11.8
			Respiratory						6.6					6.7
			Other						29.7					29.6
				Total					100.0		%			100.0		%
		Admissions by major diagnosis
			Neurological						19.6		%			19.5		%
			Cancer						32.1					31.7
			Cardio						11.8					11.1
			Respiratory						8.7					9.1
			Other						27.8					28.6
				Total					100.0		%			100.0		%
		Direct patient care margins (e)
			Routine homecare						50.4		%			51.1		%
			Inpatient						14.1					13.0
			Continuous care						19.9					20.5
		Homecare margin drivers (dollars per patient day)
			Labor costs					$	57.76				$	55.38
			Drug costs						8.33					7.97
			Home medical equipment						6.82					6.66
			Medical supplies						2.75					2.76
		Inpatient margin drivers (dollars per patient day)
			Labor costs					$	314.34				$	306.66
		Continuous care margin drivers (dollars per patient day)
			Labor costs					$	569.54				$	544.16
		Bad debt expense as a percent of revenues							0.8		%			0.6		%
		Accounts receivable --
		Days of revenue outstanding- excluding unapplied Medicare payments							36.6					55.3
		Days of revenue outstanding- including unapplied Medicare payments							30.8					29.1

The "Footnotes to Financial Statements" are integral parts of this financial information.

CHEMED CORPORATION AND SUBSIDIARY COMPANIES
FOOTNOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(unaudited)
(a)	Included in the results of operations for the three months ended March 31, 2012, are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands):
			VITAS				Roto- Rooter				Corporate				Total
	Selling, general and administrative expenses
	Legal expenses of OIG investigation		$	(71	)		$	-			$	-			$	(71	)
	Acquisition expenses			-				(15	)			-				(15	)
	Expenses of class action litigation			-				(647	)			-				(647	)
	Stock option expense			-				-				(1,938	)			(1,938	)
	Interest expense
	Additional interest expense resulting from the change in accounting for the conversion feature of the convertible notes			-				-				(1,935	)			(1,935	)
	Pretax impact on earnings			(71	)			(662	)			(3,873	)			(4,606	)
	Income tax benefit/(charge) on the above			27				260				1,424				1,711
	After-tax impact on earnings		$	(44	)		$	(402	)		$	(2,449	)		$	(2,895	)
(b)	Included in the results of operations for the three months ended March 31, 2011, are the following significant credits/(charges) which may not be indicative of ongoing operations (in thousands):
			VITAS				Roto- Rooter				Corporate				Total
	Selling, general and administrative expenses
	Legal expenses of OIG investigation		$	(511	)		$	-			$	-			$	(511	)
	Acquisition expenses			(64	)			(6	)			-				(70	)
	Expenses of class action litigation			-				(495	)			-				(495	)
	Long-term incentive compensation			-				-				(3,012	)			(3,012	)
	Stock option expense			-				-				(1,933	)			(1,933	)
	Interest expense
	Additional interest expense resulting from the change in accounting for the conversion feature of the convertible notes			-				-				(1,790	)			(1,790	)
	Pretax impact on earnings			(575	)			(501	)			(6,735	)			(7,811	)
	Income tax benefit/(charge) on the above			218				196				2,500				2,914
	After-tax impact on earnings		$	(357	)		$	(305	)		$	(4,235	)		$	(4,897	)
(c)	Under Generally Accepted Accounting Principles ("GAAP"), the Roto-Rooter segment expenses all advertising, including the cost of telephone directories, immediately upon the initial release of the advertising. Telephone directories are generally in circulation 12 months. If a directory is in circulation for a time period greater or less than 12 months, the publisher adjusts the directory billing for the change in billing period. The timing of when a telephone directory is published can and does fluctuate significantly on a quarterly basis. This "direct expensing" results in significant fluctuations in quarterly advertising expense. In the first quarters of 2012 and 2011, GAAP advertising expense for Roto-Rooter totaled $5,624,000 and $5,918,000, respectively. If the expense of the telephone directories were spread over the periods they are in circulation, advertising expense for the first quarters of 2012 and 2011 would total $6,330,000 and $6,168,000, respectively.
(d)	VITAS has 8 large (greater than 450 ADC), 16 medium (greater than 200 but less than 450 ADC) and 28 small (less than 200 ADC) hospice programs. Of VITAS' 35 unique Medicare provider numbers, 31 provider numbers have a Medicare cap cushion of 10% or greater during the first six months of the Medicare cap year; two provider numbers have a Medicare cap cushion between 5% and 10%; and two provider numbers have a cap cushion between 0% and 5%.
(e)	Amounts exclude indirect patient care and administrative costs, as well as Medicare Cap billing limitation.

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